Companies Wary Of Y2K Law

December 7, 1998

This fall, Congress passed and the President signed a law intended to make it more difficult for plaintiffs to attack companies, trade groups and other distributors of Year 2000 information, even if the information turns out to be faulty or incomplete. The law was designed to encourage firms to share ways of avoiding computer malfunctions if the devices misinterpret "00" as the year 1900, or do not recognize it as a valid year.

Unfortunately, the law has produced scant results, experts say, because businesses fear use of the information by regulators or believe sharing information opens them to potential lawsuits.

The law does not bar fraud claims and does not cover sales pitches to consumers.

It also does not apply to pending lawsuits or restrict the Securities and Exchange Commission's ability to ask for Year 2000 information and enforce its disclosure rules.

The law covers two types of information:

The narrow category, known as Year 2000 readiness disclosures, deals only with the Year 2000 status of a company's own products and services.

That covers, for instance, any comments by the Boeing Co. about its aircraft and any advice from Citibank about whether consumers can expect its automated teller machines to dispense cash.

The much broader category, known as Year 2000 statements, includes comments on other companies' products or projections about the impact of possible Year 2000 problems.

A utility trade group, for example, would have some protection if it estimated how long power plants could operate on stockpiled coal if railroads were unable to ship new supplies, as would a hospital that reported to others that a particular medical device failed a Year 2000 readiness test.

Experts report the main impact of the law has been to send companies scurrying to lawyers.

Backers of the law are already lobbying Congress to close what they see as loopholes that limit its protections and to pass additional measures which might limit future lawsuits.

Source: Barnaby J. Feder, "Companies Still Hesitate to Share Year 2000 Information," New York Times, December 7, 1998.